The S&P 500 was led lower by the real estate and communication services sectors

12 January 2021, 03:07

Market Focus

U.S. stocks fell for the first time in five sessions as investors started the week in a cautious mood with equity prices near all-time highs. The S&P 500 was led lower by the real estate and communication services sectors, while energy companies were the biggest gainers in the benchmark index. The dollar strengthened against all its major peers, with demand supported by elevated Treasury yields.

Weighing on the minds of investors worries that equities are running too hot and valuations are stretched at a time when major parts of the world are grappling with the worst of the pandemic.

Benchmark Treasury yields topped 1% last week on bets that Democratic lawmakers will enact big spending packages to drive the economic recovery out of the pandemic. The move reset expectations for a range of asset classes and sparked debate over whether higher yields might jeopardize the current environment of easy financial conditions. Ten-year U.S. yields climbed to 1.136% on Monday, the highest level since March.

Bitcoin tumbled, with prices sliding as much as 20% on Monday. Some investors have said the digital currency’s recent gains defy logic and the U.K.’s financial watchdog issued a statement that consumers in crypto should be prepared to lose all their money. The token traded down 13% at $33,160 as if writing.

Market Wrap

Main Pairs

The dollar is on pace for its biggest three-day rally since September as the House will consider an article of impeachment against President Trump on Wednesday. The euro and yen held lower levels ahead of large options expirations set for Tuesday. Seasonal trends, which are favorable for the greenback in the early part of the year, support the currency.

The dollar also rose as speculative accounts cut their long bets on the euro, pound, and Australian dollars during the week through Jan. 5, according to data from the Commodity Futures Trading Commission.

The yen was the most resilient against the dollar while commodity currencies lead losses; the Norwegian krone was the worst performer. USDJPY is +0.2% to 104.15; after climbing to 104.40, the highest in a month. The yen could gravitate towards the 104.00 level, a strike where $1.2b expire on Tuesday, trader says.

Technical Analysis

AUDUSD (4 Hour Chart)

Aussie got beaten and under pressure as strengthening greenback threatening the commodities-linked currency characteristic. Aussie pair dropped to the lowest in one week the previous day amid dollar momentum and Sino-Australia intense. Although the COVID-19 spread and the U.S. political jitters join tension between America and China to challenge the risks, expectations of heavy stimulus from Washington take the support of vaccine hopes to keep the bears away.

From a technical view, the short-term SMAVG indicator slide to the negative side, but the long-term remained upward momentum. Another one, the RSI indicator close at 42.5 which suggesting trifling bearish guidance. All of all, the Aussie movement seemingly mixed as a technical suggestion, moreover, market news would impact the price change, especially for global trade news.

Resistance: 0.7778, 0.78

Support: 0.7691, 0.7647, 0.762

EURUSD (4 Hour Chart)

Eurodollar extended the descend trend at the start of this week as the greenback consecutive to recover from the near-3- year low hit last week as U.S. yield climb. As price action, euro seemingly breakthrough an m shape shoulder then fell to multi-day lows.

For the Moving Average aspect, the short-term indicator had death cross long-term indicator that suggesting a bearish perspective. For the RSI aspect, the indicator hold in the bearish zone at 33 which is so close to the over sought area.

From the suggestion of a technical perspective, we expect the euro will continue under the pressure of a downward trend. However, price action is suggesting a critical support pivot at 1.2151 and 1.2078 follow behind.

Resistance: 1.2211, 1.2251

Support: 1.2138, 1.2078

XAUUSD (4 Hour Chart)

XAUUSD consecutive choppy all day as greenback continuous edged up which would typically be a negative move for gold and treasury yield went up to nearly 9 months highest. Both of these factors would turn gold less captive to reduce the incentive to hold over fixed income and needless for hedge inflation.

For the Moving Average aspect, the short-term indicator had death cross long-term indicator that suggesting a bearish perspective. On the other hand, the RSI indicator shows 35 which turns back from over sought area at 17 once, nonetheless, it still mires in bearish momentum at the current stage. As the following suggestion, we expect the gold market will still hold on to the current price channel which gaps between first pivot support and resistance. Moreover, if price consecutive went flip side, the third pivot support should be a critical level. Otherwise, the market seemingly will continue to drop to the year before low.

Resistance: 1865, 1878, 1900

Support: 1843, 1827, 1814